New reports on the U.S. economy are increasing concerns that the world's largest economy is in a recession. The news comes just one day after Americans elected a new president in a contest that hinged largely on economic issues.

A private research group, the Institute of Supply Management, says Wednesday the U.S. service industry - which includes businesses like banks, airlines and restaurants - shrank in October. The service sector makes up most of the U.S. economy.

Two other reports Wednesday by the private employment company ADP Employer Services and from human resources firm Challenger, Gray and Christmas show the U.S. economy is continuing to lose thousands of jobs. One report says the number of workers fired in October is up 79 percent compared to the same time last year - near a five-year high.

Meanwhile, Europe's biggest economy has moved to lessen the impact of the financial crisis. Germany Wednesday approved an almost $30 billion package of tax cuts and loans. And top British officials are urging banks to pass on interest rate cuts to consumers to help spur growth.

U.S. and European stock markets are down sharply in Wednesday's trading. The Dow Jones Industrial Average dropped five percent or 486 points to finish the day at 9,139. The S & P 500 was off 5.3 percent or 53 points to end at 953, while the NASDAQ slid 5.5 percent or 98 points to hit 1,682.

European stock markets closed much lower. London's Financial Times 100 index fell more than two percent or 109 points to end at 4,531, the CAC-40 in Paris fell two percent or 73 points to close at 3,618. And the DAX in Frankfurt dropped more than two percent or 111 points to finish at 5,167.

Asia's key markets were higher at the close of trading.

There are also indications efforts to loosen the tight credit markets may not be working well enough. A report Wednesday by an industry trade group, the Mortgage Bankers Association, says the number of Americans applying for home loans fell last week to the lowest level in almost eight years because borrowing costs remain too high.

Investors are also looking ahead to Thursday, when the European Central Bank and the Bank of England are widely expected to slash interest rates.